2024.07.22 Treasurer Dunlap Findings of Economic Development District 2Findings on
Economic
Development
District 2
prepared by
ryan dunlap
Treasurer and Commissioner of the
Otsego Economic Development Authority
July 22, 2024
Background
This report has been prepared in accordance with the responsibilities of the EDA Com-
missioner as it relates to the Powers of Establishment of Economic Development District 2.
Included in those responsibilities are that “the authority shall find that an economic develop-
ment district is proper and desirable to establish and develop within the city.”1 This report
provides findings of fact related to the proper and desirable establishment of District 2.
The Establishing Resolution states that the Otsego Economic Development Authority
was created because “the City desires to encourage, attract, promote and develop eco-
nomically sound industry and commerce within the City.”2 In order to determine if the
establishment of District 2 is consistent with those desires, it will be important to examine
the District as it relates to the stated purpose of the Authority.3
Findings related to the proper establishment of District 2
The operations of the Otsego EDA are inconsistent with state statutes
The Otsego Economic Development Authority (EDA) was established in 1992 by the City
Council per Minnesota State Statutes.4 This created a separate legal entity that is a subdi-
vision of the State, and not an extension of the City or the City Council. The Establishing
Resolution and state statutes outline the requirements of the Authority. However, the
Otsego EDA has not met in over four years, which means it has not met its obligations to
send its budget to the City Council, provide an annual report, or set a depository, and elect
its officers.
Per MN §469.100 Subd. 2 (quoted in full):
Annually, at a time fixed by charter, resolution, or ordinance of the city, an
authority shall send its budget to its city’s council. The budget must include
a detailed written estimate of the amount of money that the authority expects
to need from the city to do authority business during the next fiscal year. The
needed amount is what is needed in excess of any expected receipts from other
sources.
Prior to 2012, a budget had been established for the EDA and is reflected in the annual
financial reports and official record.
Likewise, MN §469.100 Subd. 4 provides additional annual requirements:
Annually, at a time and in a form fixed by the city council, the authority shall
make a written report to the council giving a detailed account of its activities and
of its receipts and expenditures during the preceding calendar year, together with
additional matters and recommendations it deems advisable for the economic
development of the city.
These, and other statutes, leave the status of the Otsego EDA unclear. Under MN §
469.033 Subd. 7, a Housing and Redevelopment Authority becomes dissolved and inactive
1 MN §469.101 Subd. 1.
2 Otsego Economic Development Authority.EDA Bylaws Resolutions. Sept. 14, 1992.
3 Cities often appoint advisory committees in this regard. However, the Otsego Economic Development
Authority Advisory Committee (EDAAC) was dissolved in September of 2002.
4 “EDA Act” MN §469.090 - 469.1081
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when it “transfer[s] to the city in and for which it was created all property, assets, cash
or other funds held or used by the authority.” However, a public hearing after ten days’
published notice is required and then the authority may be dissolved by City Council reso-
lution. The public record does not reflect that this has occurred, and so the status of the
EDA seems to be defunct.
This Commissioner has reviewed the utilization of Economic Development Authorities
of the surrounding cities and their budgetary processes. For the cities of Albertville, Elk
River, Rogers, and Monticello: they all utilize an EDA, and each one has an established
annual budget process. Additionally, data provided by the Minnesota Office of the State
Auditor was used to determine if other cities have gaps in EDA expenditures. The cities of
Chanhassan, New Brighton, and Little Canada were identified as cities who have inconsistent
spending for Economic Development. In each of these cases, there was an annual budget
for the EDA.
While this may not be an exhaustive examination, it is clear to this Commissioner that
it is unlikely that there are any similarly situated cities to that of Otsego: utilizing an EDA
with no budget or adherence to certain state requirements.
The EDA is being used to avoid a citizen petition
In the State of Minnesota, cities are generally required to seek permission from the electorate
prior to issuing new debt.5 One of the exceptions to this rule is the option for cities to issue
Capital Improvement Plan (CIP) Bonds that do not require the prior permission of the
electorate.However, CIP Bonds are subject to a “reverse referendum” where citizens may
file a petition to stop the issuance of the bonds, thereby leaving the power in the citizenry.
EDA Lease Revenue Bonds do not apply to this requirement as they are not debt issued
by a city. While the use of EDA Lease Revenue Bonds to avoid a petition is not expressly
authorized in the statutes, the Minnesota Court of Appeals has ruled6 that these are implied
powers. EDA Lease Revenue Bonds are rare, and using them to avoid a petition by the
citizens is even more rare.
Less expensive options exist for the city to take on debt. This option will unneces-
sarily increase annual payments and taxes. The cost will increase between $811,906 and
$1,091,4517
The Fire Study did not recommend starting a municipal fire department
After the City of Otsego decided to conduct a fire study, a Request for Proposals (RFP)
was sent detailing the requirements of the independent contractor that would conduct the
study. That RFP made the intent behind the study extremely clear:
Existing service contracts will remain in place following the study. This study is
not intended to develop an independent Fire Department for the City of Otsego.
In other words, the City of Otsego will construct any future fire station facilities,
5 MN §475.58
6 Lakes Area Business Ass’n v. City of Forest Lake. Jan. 27, 2014.url:https://scholar.google.com/
scholar_case?case=6647056344762843807&hl=en&as_sdt=6,24.
7 Northland Securities.Memorandum on Financing Options for the Fire & Emergency Services Building.
Apr. 22, 2024.url:https://permitworksforms.ci.otsego.mn.us/WebLink/DocView.aspx?id=207991&
dbid=0&repo=Otsego (visited on 05/11/2024), p. 2.
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and the current contracted Fire Departments will staff and operate the respective
fire station facilities.8
Despite this clear intent,after the study was presented to the Fire Chiefs, a request was
made to add an analysis of the performance of a stand-alone station at 85th / Park as well
as a station at 75th / Odean.9 These supplemental scenarios were included specifically at
the request of the City Council at the time, despite the initial RFP.
The recommendation of the Fire Study remained unchanged, however. The analysis con-
cluded that abandoning the contracts resulted in the worst performance of all the scenarios,
and would require four total Otsego fire stations10
The intent of the 75th / Odean location that is the subject of Development District 2, was
to operate as a substation for the Albertville Fire Department. It was never recommended to
be a stand-alone station because it does not reach the outer portions of the city, especially on
the west side. It also does not reach into Elk River, Albertville, or Rogers. As a substation,
the costs to build the station would be substantially less as it could be smaller, with less
equipment. The costly training facilities could also be eliminated from the plan, as well as
living quarters.11 This would also reduce the total cost of ownership as Otsego would not be
creating its own municipal fire department. However, this recommended scenario assumed
that no Elk River or Rogers stations would be built and so annual monitoring of response
times would dictate the need for a substation.
The recommendations put that timeline at the year 2030.
Findings related to the desirable establishment of District 2
The creation of a municipal fire department will increase taxes on business and
industry in Otsego
Estimated annual costs are as follows:12
⇒2025 $1.68MM in bond payments plus $280k in equipment depreciation
⇒2026 $2.1MM in operating expenses plus $1.425MM in equipment plus depreciation
plus bond payments
⇒2027 bond payments plus operating costs plus depreciation and maintenance
This represents a total increase in the property tax levy of approximately 22% in 2025,
62% in 2026, and 46% in 2027 when subtracting the probable fire service contract costs for
that year. A permanent 46% increase in the property tax levy for at least the next 20 years.
A significant portion of that tax burden falls on businesses and industry within the City of
Otsego and may discourage future development.
8 BeaconGIS.Independent Contractor Agreement with BeaconGIS. Mar. 12, 2018.url:https://
permitworksforms.ci.otsego.mn.us/WebLink/DocView.aspx?id=105111&dbid=0&repo=Otsego (visited on
03/15/2022), p. 11.
9 BeaconGIS.City of Otsego Fire Study. Oct. 22, 2018.url:https://www.ci.otsego.mn.us/
DocumentCenter/View/113/2018-GIS-Study-PDF (visited on 03/15/2022), p. 145.
10 Ibid., pp. 150–152.
11 Ibid., p. 111.
12 Chief Daryl Rausch. “Innovative Milestones in Emergency Services”. Mar. 26, 2024.url:https:
//permitworksforms.ci.otsego.mn.us/WebLink/DocView.aspx?id=206384&dbid=0&repo=Otsego (visited
on 03/29/2024).
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Figure 1: Existing contracts Figure 2: New station
District 2 will not improve the economic development of business and industry
in Otsego
The Fire Study cautioned against building a centralized fire station without continuing the
contracts, stating that the 75th / Odean location would cover a “region of the city that
is currently less developed.”13 As a result, the response times would not improve for the
outer portions of the city, which is more populated, and also where business and industry
currently is. The study included an analysis that shows that the businesses on the west
portion of the city are better covered by the existing fire service contracts.14
The study was completed prior to the creation of the new Elk River Fire Station, yet it
provided alternate recommendations in the situation where that station had not been built.
It also considered the possibility that Rogers would build another station, which it has now
done. That means that the situation for the contract providers has improved and the City
of Otsego has benefited as a result. There has also been the purchase of new equipment and
increases in staffing which improve the service levels for the City.
The travel time analysis provided in the study was replicated, using the existing road
infrastructure and 6 minute travel time extents. This shows similar results to what was
provided and demonstrates that the fire service contracts in Figure 1 cover more business
and industry than the District in Figure 2. The highlighted parcels in the figures represent
the business and industry within Otsego.
The existing fire contracts provide experience and specialization
The Rogers Fire Department is nearly 100 years old. The Albertville Fire Department was
formed in 1940. The Elk River Fire Department started in 1881. Each of these departments
have a substantial history and understanding of the area as they have all provided fire
services to the City of Otsego since the early 80s or 90s. Albertville and Elk River have
been providing fire service for the City of Otsego long before it was even a city. The Rogers
Fire Department started service not long after that.
It’s not just the longevity and experience of the departments that Otsego benefits from,
however. It’s also the recruitment and retention that each of these departments achieve.
The average firefighter on the Rogers Fire Department has 11 years of experience; for Elk
River it’s 8.95 years, and Albertville is at 8.75 years. Through the contracts, the City of
13 BeaconGIS,City of Otsego Fire Study , p. 147.
14 Ibid., p. 48.
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Otsego benefits from a combined total of over a millennia of experience. Additionally, the
departments have ladder trucks, boats, and tenders that our city needs for specialized rescue
and fire suppression.
It is worth noting that the Albertville Fire Department had planned on purchasing a
new tender truck for the purposes of providing fire service to areas of Otsego that do not
have hydrants. This purchase would have replaced an aging truck. However, that purchase
has been canceled due to the planned termination of the fire contract with Otsego.15
The existing fire contracts provide more cost-efficient services
Otsego residents currently pay less (per capita) than 80% of Minnesota cities for fire ser-
vice.16 This is due to the fact that the contract providers are able to offer a cost-efficient
service while having fire stations and equipment near our more populated areas.
Utilizing the economies of scale reduces overall costs. This benefits the City of Otsego
as well as the provider cities. In just one example: the purchase of the tender truck as
noted above would have had costs spread out amongst the agency and provider cities.
Instead, Otsego will have to purchase, maintain, and then replace their own tender truck,
in perpetuity. The Fire Study recommended that the cities further take advantage of this
opportunity by also pooling resources.17
The existing fire service providers are all meeting national guidelines for response
time, equipment, and staff on scene
The Request for Proposals (RFP) of the Fire Study made it clear that the City of Otsego
was not interested in validating the performance of the existing contract agencies. The
Scope of Services outlined that the study should “make recommendations for locations of
fire station facilities using compliance with NFPA 1720 as the guideline. This study is NOT
intended to prove compliance with NFPA 1720 in all of its aspects” (emphasis in original).18
Yet, that is exactly what the final study ended up finding: that all of the contract agencies
are meeting or exceeding National Fire Protection Association standards, particularly 1720:
the standard for volunteer organizations. “It was found that currently the workload is not
burdensome and that the data provided reveals that they are performing within national
benchmark guidelines for response time and amount of firefighters at the scene of a structure
fire.”19
The study recommended that a standard performance requirement should be included
in the contracts.20 However, this was not done.
Outside of the performance standards examined in the Fire Study, it’s also important
to understand the perceived performance from the public. To that end, this Commissioner
examined all of the Public Safety Commission minutes in an attempt to find complaints
about the services provided by the contract agencies. An exhaustive search of the public
record garnered one single complaint. In March of 2007, a resident complained about the
15 Jessica Charpentier. “Albertville Tables a Purchase of Fire Department Water Supply Truck”. In:Press
& News (Sept. 14, 2023).url:https://www.hometownsource.com/press_and_news/news/government/
albertville-tables-a-purchase-of-fire-department-water-supply-truck/article_194946e8-525e-
11ee-8bd8-a7448e45ee3c.html (visited on 12/14/2023).
16 Minnesota Office of the State Auditor: City Comparison Tool
17 BeaconGIS,City of Otsego Fire Study , p. 121.
18 BeaconGIS,Independent Contractor Agreement with BeaconGIS , p. 10.
19 BeaconGIS,City of Otsego Fire Study , p. 8.
20 Ibid., p. 121.
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response by the Elk River Fire Department to a garage fire. The record is so old that it is
not possible to verify the response time as no specific information about the incident was
included in the minutes. However, it is worth noting that the Elk River District has been
redrawn since this time.
A frequent complaint from and to the Commission is the response time of the ambulance
providers, however. It has been suggested that the establishment of Development District 2
and a fire station would improve the response time of the ambulance providers for the city.
However, this is unlikely to occur as the provider for the area has stated that there are not
enough calls, and the station is at the outer edge of the Primary Service Area (PSA) for the
ambulance provider.21
The true costs of owning a municipal fire department have not been explored
Examining the conclusions of the Fire Study, it is clear that the true cost of creating a
municipal fire department has not been fully explored. To match the service levels of the
existing contracts, more stations, equipment, and staff will be needed. The total cost of
ownership will strain local resources and put pressure on future Councils to consolidate fire
services with other providers.
That decision was recently made by the City of Falcon Heights. After facing staffing
shortages and reduced service levels, the city examined the costs of contracting with neigh-
boring cities for fire service and found that they could reduce the cost of fire services by
50%through a contract with Saint Paul. The Council then dissolved the city’s 72 year old
fire department and went to a contract model for fire services.22 This follows national and
statewide trends which see fire departments consolidating rather than dividing resources.
The City of Otsego will already be at that point with this plan. The projected costs
increase the property tax levy by 46% and it is clear that the contracts provide a higher
quality of service at a price point that is cost-efficient for the taxpayer.
21 See:https://mn.gov/emsrb/ambulanceservices/primary-service-area-description.jsp
22 Deanna Weniger. “After 72 Years, Falcon Heights Fire Department Closes for Good”. In:Twin Cities
Pioneer Press (Jan. 27, 2021).url:https://www.twincities.com/2021/01/27/after-72-years-falcon-
heights-fire-department-closes-for-good/(visited on 03/23/2023).
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